TheStreet Ratings Primer to Better Investing
NEW YORK (TheStreet) -- As part of our drive to increase the value of our content to our subscribers, we've decided to expose far more granular-level details about our proprietary quantitative analysis service -TheStreet Ratings - as a new feature. For those of you that aren't familiar with TheStreet Ratings, here's a quick primer.
TheStreet Ratings provides quantitative analysis, which is an analytical method that uses computer models to aid decision-making. The model crunches the latest financial releases, then ranks all stocks along an easy-to-understand scale that identifies good candidates for investment. Armed with this tool, you can proceed to your own in-depth fundamental research before making buy/sell decisions.
Here's how the system works: Each night, our computers absorb all available financial data, plus information about valuation and stock price movements. It uses these data as inputs to run interdependent calculations, which are in-turn weighted and combined to arrive at a single-point "score," or rating for each stock. This type of process is known as an algorithm - a consistent set of rules for how to solve a recurring problem, in this case picking stocks.
Depending on the score, letter grades, just like those issued in school, are assigned. A recommendation of "Buy" is given based on letter grades of A+ through B-. "Hold" equates to grades of C+ to C-. And, "Sell" is recommended at grades from D+ down to F.Numerous data points are examined, including both growth and profitability measures. Items related to the overall risk of the company's operations and its stock price also feed into the calculation. For these latter inputs, capital structure (debt and equity), durability of profit results, and stock price volatility all influence the final assessment. Within our published reports, and now through the new Ratings Research Center, we show six individual assessment indexes that form the basis for the overall Rating: 1. The Growth index measures the evolution of key items from a company's financial statements, and compares them to the company's own history and to peers. 2. The Total Return index measures a stock's relative performance in the stock market.
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